Latest Trending
Last Updated, Apr 30, 2021, 11:00 AM
For Food Delivery, Covid-19 Was a Sugar High


After monster surges in use over the past 12 months because of the pandemic, food-delivery companies are doubling down. For example,

DoorDash,


DASH -4.62%

which said its revenue grew by a quarterly average of 220% year over year in 2020, has been adding delivery for groceries and convenience goods. And the

Uber Technologies


UBER -0.29%

platform Uber Eats has bolstered its profile with grocery delivery through Cornershop in addition to its recent acquisitions of its food-delivery competitor Postmates and the alcohol-delivery platform Drizly.

Perhaps food-delivery companies are hustling to explore new verticals because they have to. A published study suggests a big headwind is coming. The paper, written by

Elliot Shin Oblander,

a doctorate candidate in marketing at Columbia Business School, and

Daniel McCarthy,

assistant professor of marketing at Emory University’s Goizueta Business School, looked at what would have happened to U.S. food delivery sales if Covid-19 hadn’t existed to quantify the impact of the pandemic.

Sales for the U.S. food-delivery business were about $51 billion last year, increasing by $28 billion from 2019, according to the authors. Using credit-card, geolocation and restaurant-listings data, they found that about $19 billion, or around 70%, of last year’s growth, was “purely due to the pandemic.” Had the pandemic not happened, sales growth in 2020 would have decelerated by over half compared with the prior year, their analysis showed. Last year’s growth was largely due to consumers opting for delivery as a replacement for in-restaurant dining, the study noted. The conclusion: If dine-in activity returned to pre-pandemic levels, food delivery growth would logically decline: “That’s just how substitution works,” the authors wrote.

For a look at how food-delivery companies are expecting pandemic-driven consumer habits to persist, consider DoorDash. At the midpoint of its guidance, the company is forecasting roughly 28% growth in its largest business segment’s gross-order value this year versus 2020—significantly tempered from the more than 200% year-over-year growth it put up last year. Still, its 2021 outlook implies roughly 300% growth at the midpoint this year versus 2019. That is significantly higher than the 186% growth DoorDash saw in the segment’s gross-order value between 2018 and 2019, implying it expects its eaters to continue to order in at elevated levels, even in a reopened economy.

DoorDash at least might be in the best position to retain customers in a vaccinated world, according to the study’s co-author, Mr. McCarthy. He notes a “double jeopardy effect” in the food-delivery industry in which DoorDash’s market-leading position makes the brand all the more appealing to eaters. New York City is perhaps the best illustration of this dynamic. While Grubhub for years held a stranglehold on that market, Bloomberg Second Measure data for March show that DoorDash somewhat suddenly owns 34% of sales there compared with Grubhub’s 37%. Of the top 12 U.S. metro areas by population, DoorDash now leads in 10 of them.

An extra benefit of being consumers’ first choice is that restaurants might be more inclined to list with it, Mr. McCarthy noted. Adding restaurants—even when they were closed for in-room dining—hasn’t been easy. While one might have expected eateries to race to pay for discovery and delivery last year, the study shows that food-delivery platforms added them at a lower rate overall between April 2020 and December 2020 compared with the same period in 2019.

DoorDash is trying to lure new restaurants by introducing pricing tiers with the lowest commissions starting at 15%. While that will make DoorDash more economically appealing to restaurants, it will also require consumers to pick up at least some of the difference in the tab. Food-delivery platforms already have some consumers paying nearly as much in fees as they are paying for food in some cases—all for the benefit of waiting for a lukewarm, packaged meal.

U.S. food-delivery customers logged 28% more orders with an 18% larger average order size in December of last year compared with a year earlier, according to Mr. McCarthy’s analysis. How often will they choose food delivery when the promise of a piping-hot meal at their favorite restaurant table returns? Investors sticking with food-delivery stocks this year have to hope that, even when eaters head back out, they will at least be ordering their paper towels and drinks in.

Demand for food delivery has soared amid the pandemic, but restaurants are struggling to survive. In a fiercely competitive industry, delivery services are fighting to gain market share while facing increased pressure to lower commission fees and provide more protection to their workers. Video/Photo: Jaden Urbi/WSJ

Write to Laura Forman at laura.forman@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

24World Media does not take any responsibility of the information you see on this page. The content this page contains is from independent third-party content provider. If you have any concerns regarding the content, please free to write us here: contact@24worldmedia.com

Latest Post

Common Mistakes When Using Athletic Field Tarps

Last Updated,Jun 5, 2024

High-Performance Diesel Truck Upgrades You Should Consider

Last Updated,May 14, 2024

Warehouse Optimization Tips To Improve Performance

Last Updated,May 6, 2024

Fire Hazards in Daily Life: The Most Common Ignition Sources

Last Updated,Apr 30, 2024

Yellowstone’s Wolves: A Debate Over Their Role in the Park’s Ecosystem

Last Updated,Apr 23, 2024

Earth Day 2024: A Look at 3 Places Adapting Quickly to Fight Climate Change

Last Updated,Apr 22, 2024

Millions of Girls in Africa Will Miss HPV Shots After Merck Production Problem

Last Updated,Apr 18, 2024

This Lava Tube in Saudi Arabia Has Been a Human Refuge for 7,000 Years

Last Updated,Apr 17, 2024

Four Wild Ways to Save the Koala (That Just Might Work)

Last Updated,Apr 15, 2024

National Academy Asks Court to Strip Sackler Name From Endowment

Last Updated,Apr 12, 2024

Ways Industrial Copper Helps Energy Production

Last Updated,Apr 11, 2024

The Ins and Out of Industrial Conveyor Belts

Last Updated,Apr 10, 2024